NTPC's new power plants may avoid bids

The draft tariff policy circulated by the government on Wednesday seeks to exempt power plants of all central public sector units or CPSUs from mandatory tariff-based competitive bidding, a move that took the industry by surprise.Sarita C Singh | ET Bureau | June 01, 2018, 08:09 IST

New Delhi: NTPC's new power plants may not have to compete with private companies if the latest government proposal goes through.

The draft tariff policy circulated by the government on Wednesday seeks to exempt power plants of all central public sector units or CPSUs from mandatory tariff-based competitive bidding, a move that took the industry by surprise.

Private power companies have been holding NTPC responsible for the stress in the sector and recently alleged bias toward PSUs by the government in handing over excess coal and transmission contracts. The lack of power purchase agreement or PPA opportunities by states is cited as one of the key reasons for stress in the sector.

The industry has hailed most other amendments proposed in the tariff policy. “This is the only regressive move in the entire draft tariff policy whose objectives are mentioned as making power available at competitive rates and ensuring financial viability of the sector. It is an established fact that cost-plus tariff is higher than tariff discovered through competitive bidding,” said an industry observer, who did not wish to be identified.

The draft policy said: “All future requirement of power should continue to be procured competitively by distribution licensees except in cases of expansion of existing projects or where there is a company owned or controlled by the state government or central government as an identified developer where regulators will need to resort to tariff determination based on norms provided….”

NTPC had signed PPAs with states for more than 40,000-mw capacity days before the mandatory competitive bidding power procurement came into force. Lenders and developers of an equal number of private power plants are grappling with stress.

The amendments to the national tariff policy ignored an earlier advice of the Central Electricity Regulatory Commission (CERC) to introduce competitive bidding for all power and transmission contracts. The power ministry decided to implement tariff bidding in procurement starting January 2011 on CERC’s advice. The commission had conducted a study on 14 projects and concluded that competitively bid tariffs were about 22 paise per unit lower than cost-plus tariffs.

“It is inexplicable as to why the power ministry does not want to expose central generation companies to competition and efficient price discovery,” said Ashok Khurana, director general, Association of Power Producers. “This will saddle discoms with long-term, high fixed cost PPAs, impacting their financial health. Fortunately this is only a draft and developers are sure that this distortion will get removed in final tariff policy document.”

The draft amendment to the National Tariff Policy 2016, however, also provides for consumer friendly measures including penalising discoms for power cuts other than in force majeure conditions. “If implemented in letter and spirit, this will be a great relief to the common man and change the face of India,” said Ravinder, a former chairperson of the Central Electricity Authority.

It also provides that after March 2019, distribution companies will not be able to pass on more than 15% technical losses into electricity tariffs.

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